CALIX LTD (CXL) - How Calix Heats Heavy Industry Without The Emissions

Cement and steel making doesn't just burn fuel, CO₂ is also released as part of the process. That’s why industrial decarbonisation is so hard, and why a “just electrify it” slogan falls short once you get into kilns, furnaces, and process emissions. We’re joined by Phil Hodgson, Managing Director and CEO of Calix Limited, to break down an Australian-developed platform technology designed to change the way heavy industry heats and processes materials.

We talk through Calix’s core technology: an externally heated steel tube kiln that keeps combustion and process gases separate. For cement and lime, that matters because limestone is nearly half CO₂ by weight. By preventing gases from mixing, Leilac Technology can deliver a relatively pure CO₂ stream, making carbon capture simpler and helping chart a path to low emissions cement. Phil also explains why hybrid heating is central to commercial adoption, switching between renewable electricity, conventional fuels, or waste fuels to stay cost-effective even where carbon pricing and policy support are not available.

From there we dig into real-world strategy: the restructure of the PLS lithium midstream joint venture toward a capital-light licensing model, the major joint development agreement with Adani Group’s Ambuja Cements, and what India’s rapid cement expansion could unlock across Asia. We also look beyond cement to green iron and steel using hydrogen (Zesty), alumina progress with Norsk Hydro, and how Calix’s magnesia water treatment business helps fund broader growth.

If you care about climate technology, clean industry, carbon capture, electrified kilns, and how ASX-listed innovators try to scale in tough markets, this conversation is for you. Subscribe to ASX Briefs, share the episode with a mate in resources or climate, and leave a review with your biggest takeaway.

Transcript

Andrew Musgrave

Welcome again to ASX Brief. And today we're joined by Phil Hodgson, the Managing Director and CEO of Calix Limited, an Australian industrial technology company developing platform solutions for industrial decarbonisation across cement, steel, alumina, critical minerals, as well as solutions in water treatment and carbon dioxide removal. Phil, great to have you with me today and welcome to the ASX Briefs Podcast.

Phil Hodgson

Thanks very much, Andrew.

Andrew Musgrave

Phil, for listeners who are new to Calix, can you explain the core platform technology, what it does, and why it matters for heavy industry?

Phil Hodgson

Certainly, Andrew. So, the core platform technology is a technology developed here in Australia. It's essentially around a new type of kiln or furnace, a new way to heat stuff up, as we say. A lot of today's minerals, cement, steel, etc., are made in furnaces and Calix has a new way to make these products. Essentially, what we do is we separate how you heat from what you heat. We do that with a rather large steel tube. The biggest tubes we've made are now as big as we'll ever make them, 1.8 meters in diameter and over 30 meters high. So, we're already a full scale on the core technology. We heat that tube to over a thousand degrees centigrade. So, this tube's glowing red hot. And whatever we heat goes down the middle of the tube. It's going to be a small particle size, much like sort of fine powder. So, iron ore fines, cement, sort of meal, all of absolutely the right size for our technology. That basically gets dropped down the tube. And as the dust or small particles floats down the tube, the red-hot walls of the tube radiate into the particles and heats them up and we can heat the tube any way you like. We can heat it with renewable energy, we can heat it with traditional fossil fuels on the outside of the tube and so the technology represents a way to heat stuff up that can use all sorts of different energy sources. But the other interesting thing is inside the tube, a lot of people may not realize that, say limestone, which is used to make cement, is nearly half by weight CO2. And so, when the cement and lime industries heat up that limestone, the CO2 comes out of the rock, and that's over half the emissions of the cement and lime industry. And so, when you're heating limestone in our tube, that CO2 doesn't escape. It doesn't head off into the atmosphere or get mixed with furnace gases. It comes out the top of the tube as a pretty pure stream. And so, the first applications of the technology we developed were to separate out CO2 when making lime and cement. But of course, since then we've gone on to look at all sorts of different applications, including our latest applications in making green iron, in which case we've got hydrogen inside the tube, which converts the iron ore to iron. So, you can see it's quite a versatile core technology platform that basically, as I say, is replacing the traditional kiln or furnace in all sorts of different industries.

Andrew Musgrave

And industrial decarbonisation is one of the hardest problems in climate. Sectors like cement and steel account for a significant share of global emissions and have few easy levers to pull. So why is Calix's approach particularly well suited to solving what others can't?

Phil Hodgson

Yeah, if you sort of think back to the tube, I described heated externally, it's actually a fairly simple, or we like to term it elegant solution. There are no moving parts, there's no complex pieces of equipment. It's basically a tube that's being heated externally. Of course, there's a lot of know-how that goes into developing the full-scale versions of this. But that's our first key advantage. The core concept is simple and elegant. The other advantage is, of course, decarbonisation, depending upon where you are in the world, is developing at different pieces. In some parts of the world, it's moving ahead, in other parts it's not. So, we need a technology that's going to be cost effective today, regardless of if there's a carbon price. And so, if you recall, I mentioned the energy flexibility of the tube, the ability to heat with electrons or heat with traditional fossil fuels or burning waste is actually one of the things that could make the technology cost effective today. So, you sort of get the decarbonization as a free ride or a cherry on top to economic solutions today with the tube. So, I think that's what separates us from other technologies attempting to achieve this.

Andrew Musgrave

Now, in April this year, the company announced the restructure of the lithium midstream project joint venture with PLS, another ASX listed company. Can you walk us through the logic of the deal? What does Calix give up? What does it retain? And why is this outcome strategically the right one for the company at this point in time?

Phil Hodgson

Yeah, this is an interesting one. We started our journey with PLS over three years ago, and that was to take a core, our core technology and use it in the lithium industry. PLS dig up spodumene, and we're using our core technology to take advantage of cheap energy, as in renewable energy at a mine site, to extract and concentrate lithium at PLS's site in the Pilbara. and so originally, we went into this deal as a joint venture partner with equity, us 45%, PLS 55%. but as the industry structurally changed and margins tightened on lithium, and that's the difference between the spodumene price and the lithium price, it became harder for us to participate in this simply because of the capital required. And so, we changed, we agreed to PLS to change the structure of the deal where we back out effectively our equity. We recovered all of the equity that we're put in, and PLS moved forward with carriage of the project, licensed from us. And so, the solution, which is the ability to produce lithium at a mine site with renewable energy, is jointly owned by us and PLS. And moving forward, we'll be sharing the margins on that when applied to third parties. But as part of the deal, PLS get a free license. So, so we got a capital back, PLS get a free license. So, the logic is that there's no downside for us. We're not exposed from a capital perspective. There's only upside with respect to license income from third parties, and we get paid engineering fees. It's really part of a capital light strategy that we're very focused on and doubling down on to some extent now as well. So that's the logic behind the deal.

Andrew Musgrave

Now turning to Leilac Technology. Leilac Limited is Calix's cement and lime application subsidiary. So, for our listeners who may not be familiar, can you explain what Leilac does and specifically why the ability to separate processed CO2 in cement is such a difficult and valuable problem to solve?

Phil Hodgson

Yeah. So, I described previously, I guess, our tube, the core part of our technology that we that we heat from the outside. And when we're processing cement, which is mainly limestone, that gets dropped down the middle of the tube and as that heats up, the CO2 comes out of the rock. And so that CO2 in a normal cement kiln gets mixed with furnace gases and ejected into the atmosphere. So separating CO2 from a whole lot of other gas is really difficult. You need big chemical plants to solve that problem and with our technology though, because the CO2 is trapped in the tube, it exits the top of the tube as a pretty pure stream. And so, the core technology has the ability to directly separate that CO2 that's coming out of the rock. And so that's what makes it a little different. We're not trying to separate a gas from a gas, we just don't allow the gases to mix in the first place. And of course, the ability to heat the tube, say with renewable electrons, you can see how we can start to get to very low to zero emissions cement using our technology.

Andrew Musgrave

And Leilac's hybrid heating system has the potential to lower fuel costs for cement producers independent of any carbon price. How important is that dual value proposition reducing costs now while enabling carbon capture later in convincing cement majors to commit to the technology?

Phil Hodgson

Well, I'd say it's critical. If you've in terms of the early part of the podcast, we talked a little bit about decarbonisation and the different pace at which different parts of the world are chasing decarbonisation. Some areas certainly stalled. So, if you have a technology that has a value proposition today without a price on carbon, then that can allow some of these cement majors to move forward on looking at the technology and committing to the technology. And they get the carbon and decarbonisation down the track as the cherry on top. So, the hybrid heating system, this is the ability of our tube to be heated in any way you like. We can have renewable electrons on the outside of the tube. We can have gas burning normal gases like fossil fuels, or we can burn waste. And so, the ability to switch between electrons, which may be expensive in some parts of the day, but cheap in other parts of the day, switching between those electrons and a standard fuel or even a waste fuel, which in some cases is very cheap to negative cost, that is what enables the technology to be economic today. And so, the hybrid heating system is a very important part of the technology that allows it to be economic today.

Andrew Musgrave

And you've landed a joint development agreement with the Adani Group's Ambuja Cements, one of the world's top cement producers, and it's a significant commercial milestone. So, how did this partnership come about and why has Leilac been selected as a strategic partner?

Phil Hodgson

Yeah, so we've been in discussion with many cement producers over several years, Adani among them. Adani, of course, became a major cement producer overnight with the purchase of Holcim's assets in India. They instantly became number two cement group in India and so in discussion with Adani and numerous other cement players, they've become interested and got to know about our technology but really the difference in terms of the intensity the partnership came about as our hybrid technology was developed. We'd built our first direct electrified kiln in Bacchus Marsh about two years ago and demonstrated the technology and so once we'd done that and started to put together the techno economics around operating in what we call hybrid mode, switching between electrons and fuels, that's what really interested Adani. Adani, of course, are a major energy player in India and a major infrastructure player. And so, the ability to then link those business interests with cement production and flexible cement production is what anchored this deal and so with respect to Adani, the project is targeting to be economic today as we develop it. But of course, the ability for the technology to separate CO2 is, I guess, helping to future proof. And so again, Adani, you've got that option down the track as well. So, that's a little bit of the history of the deal and the logic behind the deal.

Andrew Musgrave

Okay, and India is a massive and growing cement market driven by urbanization. So why is the Ambuja Cements partnership strategically important beyond the project itself? And what does it potentially open up for Leilac in Asia more broadly?

Phil Hodgson

Yeah, and with Adani's move, as I mentioned, into cement in 2022, they've also, since that move, acquired three more cement companies in India. They're now at over 109 million tons per annum of cement production, which places them just inside the top 10 in the world. Their target is to get to 155 plus million tons per annum of cement production within two years, which would place them about number six in the world. So, they've got a very ambitious growth strategy and that growth strategy, as I sort of hinted at before, lays across their total approach to the conglomerate business that they are. They're big players in conventional energy, big, big players in renewable energy and deploying massive amounts of renewable energy at scale. And they're big, big players in infrastructure, not just construction, but also existing rail and port and so the cement industry that they're building now sits beautifully in that conglomerate. So, the ability for our technology to link into those other aspects of the Adani business is what's driven this deal. And so given Adani's growth plans, given their ambitions, then this opportunity certainly opens up a massive market for Leilac if Adani can achieve their growth ambitions. And so, it's non-exclusive. So, that's we're not tied solely to Adani with this deal, but certainly the Adani momentum and their reputation is to get things done quickly. And so, a fast path to commercialization is why this is also strategically important for Leilac.

Andrew Musgrave

Now, cement and lime are Leilac's primary focus, but Calix's platform technology reaches across iron and steel, alumina, magnesia, critical minerals, and carbon dioxide removal. So, how far advanced are these other verticals? And which sectors do you see as the next major commercial opportunities after cement?

Phil Hodgson

Yeah, let's cover iron and steel first. I mean, cement is about 8% of global CO2. Iron and steel is similar, about 8% of global CO2. And so, in our iron and steel part of the business, we're calling that ZESTY, Zero Emission Steel Technology. We've made quite some progress in the last 12 months. We announced support from ARENA to the tune of $44.9 million to move ahead to get a demonstration plant here in Australia. And then that was July, then in November, we announced Rio Tinto coming in to support the development of the technology with $35 million in cash and in kind. And we're in the process now of progressing that project, finding a little bit of extra funding to help match the ARENA funding. And our target is to get that project past a final investment decision this year. And so, lots of effort going on the iron and steel opportunity. The market is massive for that particular opportunity there. So, certainly that's a primary focus for us. But I mentioned alumina as well. Alumina pretty close behind iron and steel as a major metal and also a major producer of CO2 globally. Alumina, we've worked with Hydro, Norsk Hydro, to start to develop a project uh that's looking at implementing a pilot facility in the Alunorte refinery in Brazil, which is the largest alumina refinery in the world outside of China and so the application for the core technology in alumina is really moving ahead nicely as well. But we're not just an R&D and development platform. Our magnesia business was established in about 2013. It actually earns money for us. So, it's been growing very nicely for us. We're selling a magnesia-based product into water treatment, and so our revenues are growing very nicely from that business. And that's helping to pay for lunch while we develop all the other applications of the technology. So, we've got multiple different verticals or applications, slightly at different stages of development, but underpinned by cash generating business in magnesia.

 So, lot’s that we're progressing into some very big sectors.

Andrew Musgrave

Now, finally, Phil, Calix is building businesses to solve some of the hardest industrial emissions problems on the planet. So, what's your message to investors about where the company is headed and what are you trying to ultimately achieve?

Phil Hodgson

So, I think as I mentioned and a bit of a theme, I guess, through the podcast is we're seen as a decarbonisation company, but I'd like investors to take away that we're much more than that. Decarbonization is one of those things that certainly was a very big focus for the globe three or four years ago. Perhaps with recent geopolitical events it's become less of a focus. But the pendulum will swing back. What that pendulum swinging away from us has forced us to do is to bring to the fore the technoeconomic advantages of the technology today, regardless of decarbonization. And that's what we're pushing forward hard on. And so, the ability to get the technology implemented commercially without a price on carbon is a real focus for us. And also, the ability to do that with minimal capital from our side. So, the Adani deal, for example, we won't be putting any capital into that project. That'll come from Adani. So, progressing the technology on the basis of an economic proposition today with no capital from us is what this company is about. And as the decarbonisation pendulum swings back, we'll be there to take advantage of that as well.

Andrew Musgrave

Okay, Phil, with strong commercial progress seen in many industrial applications of the core tech, and now a landmark partnership with the Adani Group to decarbonize cement at commercial scale. It's certainly been a pivotal year for Calix. So, thanks for joining me today, and we look forward to further updates in the upcoming months.

Phil Hodgson

Excellent. Thank you very much for having much.

Andrew Musgrave

That concludes this episode of ASX Briefs. Don't forget to subscribe, and we look forward to catching you on our next episode.